Hi thanks for the great writeup on $ROOT. You absolutely hit the nail on the head and 3Q24 results (stock +175%) in one day on net income profitability was just sick. But the stock has come back down and consolidated recently.
How do you view the 4Q24 results and setup into Feb FY24/4Q24 results? Alex Timm was just at ICR (Orlando retail conference) this week and sounded very bullish on $ROOT. Was wondering if you had any thoughts on the setup of the stock into earnings (i.e. are we looking at another strong topline/bottomline beat?).
Also it seems like consensus expectations for FY25E/26E are too low. Root is growing topline at 100%+ rates y/y per quarter, and consensus has then at 10%-ish topline growth for next few years - is this modeled correctly? The stock trades at a single digit multiple of FCF and growing 100%+ which is not something you see every day.
Lastly, I'm surprised nobody mentioned this but how do you view the impact of autonomous driving (and fairly fast adoption of Tesla's FSD) to Root's auto insurance biz (and the auto insurance industry as a whole)?
Loss ratio is how profitable they are on a per policy basis by just looking at claims/LAE. Combined ratio takes into account all other costs for operating profitability such as admin and marketing.
Bc of their operating leverage using FCF is a hard estimate to utilize (which I tried to accommodate with a large multiple) and because of their rapid growth so the book multiple. EV/Sales is probably the best but they’re all estimates due to the age, inflection, and growth of the company.
Edwin Dorsey / Bear Cave is openly critical of Root / Root's tech...thoughts? 16:54 - https://www.youtube.com/watch?v=MozIUdLkRq4&t=6106s
He is discussing root insurance from 2020 not root insurance from 2024. They are in a completely different position now.
Hi thanks for the great writeup on $ROOT. You absolutely hit the nail on the head and 3Q24 results (stock +175%) in one day on net income profitability was just sick. But the stock has come back down and consolidated recently.
How do you view the 4Q24 results and setup into Feb FY24/4Q24 results? Alex Timm was just at ICR (Orlando retail conference) this week and sounded very bullish on $ROOT. Was wondering if you had any thoughts on the setup of the stock into earnings (i.e. are we looking at another strong topline/bottomline beat?).
Also it seems like consensus expectations for FY25E/26E are too low. Root is growing topline at 100%+ rates y/y per quarter, and consensus has then at 10%-ish topline growth for next few years - is this modeled correctly? The stock trades at a single digit multiple of FCF and growing 100%+ which is not something you see every day.
Lastly, I'm surprised nobody mentioned this but how do you view the impact of autonomous driving (and fairly fast adoption of Tesla's FSD) to Root's auto insurance biz (and the auto insurance industry as a whole)?
Thanks
The bundling is indeed a good lever to strengthen retention.
First you write loss ratio is the best indicatilor of underwriting profitability, which you later corrected for combined ratio.
How do you calculate FCF for an insurance? And does FCF make any sense for an insurer?
Loss ratio is how profitable they are on a per policy basis by just looking at claims/LAE. Combined ratio takes into account all other costs for operating profitability such as admin and marketing.
Bc of their operating leverage using FCF is a hard estimate to utilize (which I tried to accommodate with a large multiple) and because of their rapid growth so the book multiple. EV/Sales is probably the best but they’re all estimates due to the age, inflection, and growth of the company.